War in way of economic recovery

A slow but steady economic recovery in the United States may be getting underway, but it will remain in low gear until war in Iraq is concluded, according to Eli Lustgarten, managing director of financial investment firm H.C. Wainwright & Co. Inc. Lustgarten said that despite conflicting signals earlier this year, the stage has been set for an economic recovery to start this year and pick up speed

A slow but steady economic recovery in the United States may be getting underway, but it will remain in low gear until war in Iraq is concluded, according to Eli Lustgarten, managing director of financial investment firm H.C. Wainwright & Co. Inc.

Lustgarten said that despite conflicting signals earlier this year, the stage has been set for an economic recovery to start this year and pick up speed in 2004.

"There are a lot of cross currents, but on the whole platform of things, the economy is getting better, not worse," Lustgarten said.

For example, retail sales fell 1.6% overall in February, followed by major drop-offs in auto sales: General Motors' sales fell 19%, DaimlerChrysler's dropped 4%, and Ford Motor Co.'s stayed flat. However, Lustgarten noted that the U.S. Gross Domestic Product (GDP) growth overall is increasing, noting that GDP in the fourth quarter last year was revised upward by the Commerce Department from 0.7% to 1.4%.

Another key is that industrial output and inventories are growing, albeit at a very slow pace. Industrial production rose 0.8% in January and 0.1% in February, with inventories rising 0.2% in January. However, orders for manufactured goods overall rose 2.1% in January and total U.S. business sales increased 1.2% that month, too.

Lustgarten thinks those statistics represent positive signs that the economy is headed in the right direction.

"Inventory liquidation was 70% to 80% responsible for the last six U.S. recessions, so rising inventories is just one point as to why we have reasonable economic optimism right now," he said.